Keystone Klub skill games lounge opens with 30 machines in Palmyra

A second skill games operator is now active in Lebanon County.

Scranton-based Keystone Skill LLC, doing business as Keystone Klub, opened a 30-machine arcade to the public on Saturday, Aug. 30, in the Palmyra Shopping Center at 901 E. Main St.

Skill games, currently unregulated and untaxed in Pennsylvania, resemble casino slot machines, but multiple Pennsylvania courts have ruled that they are not illegal gambling devices since some amount of skill, rather than pure luck, is required to win a cash payout.

Keystone Skill operates dedicated skill game lounges throughout Pennsylvania, 18 at present, according to public records. It is the second company to put skill games in Lebanon County. Pace-O-Matic, which labels its machines “Pennsylvania Skill,” has had machines in the county for several years.

The two skill game companies have markedly different business models. Instead of dedicated arcades with all machines in a single location, Pace-O-Matic takes a decentralized approach, putting its Pennsylvania Skill machines in local clubs, taverns, fraternal organizations, and small businesses throughout the county.

Keystone Klub Palmyra is open to anyone over 18 and serves free food and beverages – including beer to those over 21 – to players, according to manager Kim Isabelle.

The Pennsylvania Liquor Code does not prohibit unlicensed businesses from giving free alcohol to persons 21 or older as long as no donation, admission fee, or purchase of any item or service is required. In other words, persons who request free alcohol without paying for a service or product must be served for free, assuming they are not underage or visibly intoxicated.

Prompted by news of Keystone Klub’s planned expansion to Lebanon County, earlier this year Palmyra councilman Marcus Riddell proposed that the borough ask its solicitor to draft its own electronic skill games regulation ordinance, but later withdrew the motion.

Read More: Palmyra council pauses proposed skill games ordinance to work on solution

LNP reported in June that the Keystone Klub chain was owned by North Carolinians David and Kim Eilers, who started operating in Pennsylvania in 2022 after North Carolina courts ruled that their games, even if some skill was required to win, were illegal in that state.

LNP also reported that, “the Pennsylvania Gaming Control Board added David Eilers to its involuntary exclusion list — a no-fly list for casinos in Pennsylvania — only a few months later for his conviction on two misdemeanor gambling offenses in North Carolina, combined with his ownership of state gaming parlors and holding a ‘Player’s Club Card’ for at least one Pennsylvania casino.”

Chris Ceccoli, principal owner of Pennsylvania’s Keystone Klubs, told LebTown in an Aug. 30 phone call that he and his Keystone Klubs have no business relationship with either Eilers and that he believes the original Pennsylvania Keystone Klub the Eilers opened in Dauphin County no longer exists, at least under that name.

“We just got tied into the name with Eiler, who turned out to be a bad guy,” Ceccoli said. “Eiler is gone and I believe they changed the name of that place.”

The politics of Pennsylvania skill games

Regulation and taxation of skill games is a front burner issue in Harrisburg, where the General Assembly is over two months late in adopting the commonwealth’s next annual budget. Skill games revenue has been eyed by lawmakers on both sides of the aisle as a way to narrow the current budget gap.

Pennsylvania’s casinos, often reviled by skill game operators and lobbyists as competitors out to destroy them and their small business customers, pay a 54% tax on slot machine revenue.

Governor Josh Shapiro has suggested taxing skill games revenue at 52% rate, a proposal that has drawn furious opposition from the industry, including Pace-O-Matic, which says it would kill the skill game industry and threaten the existence of its many small business customers.

State Rep. Eugene Yaw (R-23), whose district includes Miele Manufacturing, assembler of Pace-O-Matic machines, has introduced legislation that would tax skill game revenue at 16%, which has Pace-O-Matic’s backing.

State Senator Chris Gebhard (R-48) has introduced a bill that would set a 35% tax rate. This, he told LebTown, was merely a starting point for negotiations, halfway between Shapiro and Yaw. His bill has also drawn opposition from the industry.

The prospects for any of these proposals are unclear given the current budget turmoil in Harrisburg.